New Zealand Oil and Gas has agreed to sell its 15% interest in Kupe gas and oil fields and production station to Genesis Energy for NZ$168m ($119.27m).

The transaction would become effective on 1 January 2017. New Zealand Oil & Gas would be entitled to override royalty interests.

The deal is subject to approval of New Zealand Oil and Gas shareholders.

“Should the transaction be approved at the special meeting, we will return $100m to shareholders in 2017.”

A meeting with shareholders will be held on 16 December seeking their endorsement to the transaction.

The company would also seek the approval of the Ministry of Energy and Resources.

New Zealand Oil & Gas acting-CEO Andrew Jefferies said: “Since we worked with our joint venture partners to upgrade our Kupe reserves over the last year or so, we have been clear that the investment provides considerable upside for our shareholders.

“The transaction with Genesis allows New Zealand Oil & Gas to realise this upside now, while removing the risks of development and uncertainty around future market conditions.”

“The offer from Genesis represents a premium that crystallises the value that we see ahead.

“We expect the transaction to result in a higher share price that will substantially narrow the discount to underlying asset value.

“Our acquisition activities will be re-energised with an enhanced financial capability that allows us to better diversify.

“Should the transaction be approved at the special meeting, we will return $100m to shareholders in 2017.

“The company remains committed to our ongoing exploration obligations and this transaction provides a springboard into new investment opportunities.”

Kupe oil field is located in Tasman Sea, 30km off from the Manaia town.

Discovered in 1986, production from this field started from 2009.

Origin Energy, which holds 50% interest, operates the project. Currently, Genesis Energy holds 31% stake  in this project while Mitsui E&P owns 4%.

New Zealand Oil & Gas sells all natural gas and LPG procured from the field to Genesis and Vector, respectively.